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Pay Raise Formula:
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The Pay Raise Calculator 12 Months calculates your new salary after applying a monthly compounded raise over a full year. This accounts for the compounding effect of regular pay increases throughout the year.
The calculator uses the monthly compounded formula:
Where:
Explanation: The formula calculates the effect of applying your annual raise incrementally each month, which results in slightly higher total earnings due to compounding.
Details: Monthly compounding of raises provides a more accurate calculation of your actual annual earnings compared to simple annual calculations, especially when raises are applied incrementally throughout the year.
Tips: Enter your current pay in your local currency and the annual raise percentage. Both values must be positive numbers (raise can be 0 for no increase).
Q1: Why use monthly compounding instead of annual?
A: Monthly compounding more accurately reflects how raises are typically implemented in payroll systems, where increases are applied to each paycheck throughout the year.
Q2: How does this differ from simple interest calculation?
A: Simple calculation would be Old Pay × (1 + Raise %), while compounding accounts for the effect of applying the raise incrementally each month.
Q3: What if my raise is applied differently?
A: If your raise is applied as a lump sum at year-end, use simple calculation. For monthly or quarterly implementations, compounding provides more accuracy.
Q4: Can I use this for hourly wages?
A: Yes, enter your annual equivalent hourly wage (hourly rate × typical hours per year) for accurate calculations.
Q5: Does this account for taxes or deductions?
A: No, this calculates gross pay only. Net pay will vary based on tax brackets, deductions, and other factors.